Correlation Between Ningbo Tech and Sinocat Environmental

Can any of the company-specific risk be diversified away by investing in both Ningbo Tech and Sinocat Environmental at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ningbo Tech and Sinocat Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ningbo Tech Bank Co and Sinocat Environmental Technology, you can compare the effects of market volatilities on Ningbo Tech and Sinocat Environmental and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ningbo Tech with a short position of Sinocat Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ningbo Tech and Sinocat Environmental.

Diversification Opportunities for Ningbo Tech and Sinocat Environmental

0.33

Correlation Coefficient

Ningbo Tech  Sinocat Environmental

Weak diversification

The 3 months correlation between Ningbo and Sinocat is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Ningbo Tech Bank Co and Sinocat Environmental Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinocat Environmental and Ningbo Tech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ningbo Tech Bank Co are associated (or correlated) with Sinocat Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinocat Environmental has no effect on the direction of Ningbo Tech i.e., Ningbo Tech and Sinocat Environmental go up and down completely randomly.

Pair Corralation between Ningbo Tech and Sinocat Environmental

Assuming the 90 days trading horizon Ningbo Tech Bank Co is expected to under-perform the Sinocat Environmental. But the stock apears to be less risky and, when comparing its historical volatility, Ningbo Tech Bank Co is 1.98 times less risky than Sinocat Environmental. The stock trades about -0.11 of its potential returns per unit of risk. The Sinocat Environmental Technology is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,058  in Sinocat Environmental Technology on December 4, 2024 and sell it today you would lose (192.00) from holding Sinocat Environmental Technology or give up 9.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Ningbo Tech Bank Co  vs.  Sinocat Environmental Technolo

Ningbo Tech Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ningbo Tech Bank Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Sinocat Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sinocat Environmental Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sinocat Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ningbo Tech and Sinocat Environmental

The main advantage of trading using opposite Ningbo Tech and Sinocat Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ningbo Tech position performs unexpectedly, Sinocat Environmental can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sinocat Environmental will offset losses from the drop in Sinocat Environmental's long position.

The idea behind Ningbo Tech Bank Co and Sinocat Environmental Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.